Research
Working papers
Measuring the Impact of Remote Work Using Big Data, 2024
with Alan Kwan and Alex Yuskavage
Western Finance Association, Cornell University, Arizona State University, University of Connecticut Finance Conference, Midwest Finance Association, Yale University, NBER Work-From-Home Shock to Labor Markets, University of Rochester, Dartmouth College, SFS Cavalcade North America, Young Finance Scholars Consortium, Stanford Conference on Remote Work, NBER Summer Institute (IT and Digitization Lightning Round), Asia Online Corporate Finance Workshop, Hong Kong Applied Micro Workshop, National University of Singapore, Hong Kong University
We construct a firm-level measure of remote work for thousands of firms in the United States using data on the daily Internet activity of individuals from 2019 to 2022. We classify whether the Internet activity of each employee originates from remote work locations or the office and aggregate to the firm-level to measure the share of remote work activity for each firm over time. We implement a number of validation tests of our remote work measure, including a comparison with county-week-level mobile phone data on workplace visits. We find that a 1% decrease in workplace visits corresponds to a 0.756% increase in remote Internet activity. We then study the impact of remote work on firm performance using confidential tax data. We document a negative relationship between changes in remote work and firm-level total factor productivity (TFP). To account for selection effects, we implement two instruments for remote work adoption: pre-pandemic commute distance and employee political contributions. Within industry and location, both longer commute distances and Democratic-leaning donations are associated with a significant increase in remote work. In both specifications, we document an economically significant increase in firm-level TFP following a shift to remote work. Measures of employee shirking based on the websites they visit are consistent with these results: while remote work is associated with greater shirking activity in OLS specifications, this relationship disappears in our IV specifications. In the cross-section, the benefits of remote work accrue to firms with stronger monitoring ability and worker incentives.
Entrepreneurial Spawning from Remote Work, 2024
with Alan Kwan, Richard Townsend, and Ting Xu
SFS Cavalcade North America (scheduled), Midwest Finance Association (scheduled), ITAM Finance Conference, KAIST/Korea University, First Winter Finance Summit in Asia, HEC Paris Entrepreneurship Workshop, CUHK-RAPS-RCFS Conference, Hong Kong Applied Microeconomics Workshop, University of Notre Dame
This paper shows that remote work increases wage workers' transition into entrepreneurship. Using big data on Internet activities, we create a novel firm-level measure of remote work. We show that firms with greater increases in remote work during the pandemic are more likely to see their employees subsequently becoming entrepreneurs. This holds both unconditionally and relative to other types of job turnovers. We establish causality using instrumental variables and panel event study. The spawning response is stronger among younger and more educated employees, and the marginally created businesses are not of low quality. The effect is not driven by employee selection, preference change, or forced turnover. Rather, remote work increases spawning by providing the time and downside protection needed for entrepreneurial experimentation. We calibrate that at least 13.4% of the post-pandemic increase in new firm entry can be attributed to spawning from remote work.
Biased Assessment of Comovement, 2020
American Finance Association Annual Meeting, University of Notre Dame, University of Chicago, University of Southern California, Virginia Tech, University of Florida, National University of Singapore, Hong Kong University, Chinese University of Hong Kong, Yale University
I document a systematic bias in the assessment of comovement: individuals assess a moderate relationship between two variables regardless of the actual strength of the relationship between them. In a survey of finance professionals, participant-assessed betas of different financial and macroeconomic variables with the market are approximately 0.5 regardless of the actual historical betas. In an empirical setting, electricity futures exhibit moderate comovement with gas futures despite persistent heterogeneity in their relationship in the spot market. Trading against this bias generates annualized excess returns of 7.3 percent and a Sharpe ratio of 1.14.
Publications
Institutional Investor Attention, 2025, Accepted, Journal of Finance
Western Finance Association Annual Meeting, Behavioral Finance Working Group, Arizona State University, ITAM Finance Conference, University of Florida (Warrington), Zhejiang University, NBER Behavioral Finance Spring Meeting, University of Cincinnati, University of Notre Dame
Using a dataset of internet news reading, we measure fund-level attention to both aggregate and firm-specific news and relate it to fund portfolio allocation decisions. In the time-series, we find that funds shift attention toward macroeconomic news during periods of high aggregate volatility. Those funds which exhibit stronger attention reallocation patterns deliver higher returns. In the cross-section of fund portfolios, fund attention is positively related to stock holdings. Furthermore, fund attention to a stock increases the value-add of that position to the fund’s performance. This relationship is stronger using fund attention to more value-relevant news articles.
Fed Information Effects: Evidence from the Equity Term Structure, 2025, Journal of Financial Economics
with Ben Golez
American Finance Association Annual Meeting (scheduled), University of Virginia (Darden), SFS Cavalcade North America, Catalan Economic Society, Mid-Atlantic Research Conference in Finance at Villanova, University of Connecticut Finance Conference, Midwest Finance Association Annual Meeting, Boston College, Johns Hopkins University, USC Macro-Finance Conference, Rutgers University, University of Texas Austin, CUNY Baruch, Wabash River Finance Conference, Tilburg University, University of Notre Dame
Do investors interpret central bank target rate decisions as signals about the current state of the economy? We study this question using a short-term equity asset (dividend strip) that entitles the owner to the dividends of the aggregate stock market over the next six months. If monetary policy news causes investors to update their beliefs about near-term aggregate cash flows, this will immediately be reflected in the short-term asset return measured in a narrow window around each FOMC announcement. We develop a stylized model of monetary policy and the equity term structure and derive tests of Fed information effects using the short-term asset announcement return. Consistent with information effects, the short-term asset return in a 30-minute window around FOMC announcements loads positively on unanticipated changes in the target rate. Furthermore, this short-term asset announcement return positively predicts near-term macroeconomic growth. This predictability disappears on non-FOMC announcement days.
FOMC News and Segmented Markets, 2025, Journal of Accounting and Economics
with Ben Golez and Peter Kelly
Hawaii Accounting Research Conference, Analyst Research Conference, University of Notre Dame
A growing body of evidence suggests that FOMC announcements can affect private sector beliefs about near-term macroeconomic conditions. We measure the impact of central bank policy on index option trader beliefs about near-term economic conditions using the return of short-term dividend strips around each FOMC announcement (we term this short-term dividend strip return, “SDR”). Consistent with the idea that these announcements contain valuable information about macroeconomic conditions, we find that SDR predicts both future firm-level earnings and firm-level earnings announcement returns. Furthermore, using analyst earnings forecasts, we provide evidence of belief underreaction to FOMC announcements. We discuss how investor specialization and segmented markets can generate our empirical results.
Long Run Risk: Is It There?, 2022, Journal of Finance
with Yukun Liu
University of Notre Dame, Northern Finance Association Annual Meeting (Ph.D. Session), European Finance Association Annual Meeting, China International Conference of Finance, Hong Kong University Finance Seminar, ASU Sonoran Winter Finance Conference, USC Marshall Ph.D. Conference in Finance
This paper documents the existence of a persistent component in consumption growth. We take a novel approach using news coverage to capture investor concern about economic growth prospects. We provide evidence that consumption growth is highly predictable over long horizons – our measure explains between 23 and 38 percent of cumulative future consumption growth at the 5-year horizon and beyond. Furthermore, we show a strong connection between this predictability and asset prices. Innovations to our measure price 51 standard portfolios in the cross-section and our 1-factor model outperforms many benchmark macro- and return-based multi-factor models.
Maio (2023) implements the cross-sectional asset pricing tests of the NI-index from Liu and Matthies (2022). Maio (2023) confirms that every pricing result in Liu and Matthies (2022) replicates successfully. Next, Maio (2023) runs new tests which test the asset pricing power of the NI-index on different subsamples of portfolios and argues that the cross-sectional pricing power of the NI-index is driven exclusively by the 10 momentum test portfolios. This claim is false. If the NI-index exclusively prices the momentum portfolios, then the pricing power of the NI-index should disappear after removing all momentum portfolios from the set of test assets. Despite this being the only direct test of the central claim in Maio (2023), the results of this test are never shown by the author. We implement it here by removing all 10 momentum portfolios from our sample and testing the asset pricing power of the NI-index on the remaining 41 test portfolios (25 Size-BM, 10 Industry, and 6 Bond portfolios). The price of risk of the NI-index is positive and significant with a sizeable adjusted R-squared of 50 percent. This simple test unequivocally rejects the claim that the pricing power of the NI-index is driven exclusively by the momentum portfolios. Maio (2023) makes several more minor points which we address in a similar fashion.
Early Stage Projects
Strategic Communication, 2024, with Toomas Laarits, Kaushik Vasudevan, and Will Yang
Speed Limits in Asset Prices, 2022, with John Shim and Chen Wang
Who Reads What, 2024, with Zhi Da, Alan Kwan and Yukun Liu
Middle Class Inflation, 2024, with Thomas Bonczek